A client was referred to me to have her hardware product repackaged. Somebody was assembling these things in his garage, and frankly, they didn’t look very professionally-made. 

Me: Okay, I’ll quote 100 hours (at my 20-years-ago rate) to redo this from the ground up. It’ll be in a more attractive, more durable case, and most importantly, you’ll be able to get it manufactured in bulk quantities instead of the way you’re doing it now.

Client: That sounds fine, but I can’t afford your quote.

ME: I understand. It’s tough to scale up a small business. So I’ll tell you what: if you let me build the first 500 units, I’ll build an extra margin into the manufacturing quote to recover my design and engineering expenses. You won’t be out any money up front, and I’ll recover my fee as your customers pay you.

Client: Okay, sounds great!

Six months or so later, I’ve built about 100 units and momentum is building. I’m hopeful that she might be able to sell the additional 400 I need to break even within the next six months.

Client: We’ve looked at the numbers, and we’ve decided that your price is too high for these. We can get them made by [X] for [just about exactly my fee margin less].

Me: Yes, our agreement was that they would be more expensive so that I could recover my design fee.

Client: Yeah, but we can get them made cheaper since you did the redesign. So that’s what we’re going to do.